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Economy in Brief

Real Incomes by State and Metro Areas
by Charles Steindel  May 17, 2018

BEA has released its estimates of 2016 real personal incomes for states and metro areas. These estimates are derived by computing personal consumption price deflators for those locations (data on regional CPIs are used in this process). In general, differences in price levels largely reflect differences in rents. Housing costs, and rents, are typically higher in areas with higher nominal incomes; thus, the per capital real personal income numbers generally have a lower spread than their nominal counterparts.

The states with the largest increases in real personal income in 2016 were Georgia and Utah, which both saw 3.3 percent growth (DC was up 4.5 percent). Seven states, all energy-intensive, saw real declines, with the 3.6 percent drop in Wyoming being the largest. By region, the far West (aside from Alaska) appeared to have the largest gains.

In general, putting per capita income in real terms doesn’t radically change one’s impressions of the more and less affluent parts of the nation. Despite high prices, Connecticut reports the highest real income of any state (DC, though, is even higher), with New Mexico—just a touch beneath Mississippi—being the lowest. A few states with extraordinary housing costs do appear to have notably softer incomes in real terms. Hawaii may be the most notable example, with BEA estimating that per capital real income in the Aloha State was more than 13 percent under the national average in 2016 (and less than 4 percent higher than New Mexico). California is likely the state now most notorious for high housing costs. Its real per capita income was estimated to be just about equal to the national average (New York was a bit higher; Texas and Florida were lower).

Texas has the metro areas with the highest and lowest real incomes. Midland was number 1 in 2016, with a 2009-dollar per capita income of 93,204 (Midland also saw the largest decline in real per capita income in 2016!), while Mc-Allen-Edinburg-Mission’s real per capita income of was barely one-fourth, at $26,640.

The metro area data do show that while housing costs have a noticeable effect on real incomes, they are not the whole story. The San Francisco, San Jose, and Seattle areas all have per capita real incomes noticeably above the national average, despite the extraordinary housing costs one reads about (California’s state average is held back by Los Angeles, San Diego, and Sacramento clocking in at about the national figure, while Fresno is well below). The poverty in the Rio Grande Valley is not statistically erased by lower housing costs.

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